1998 (4) TMI 560 - HC - Income Tax

Supreme Court upholds validity of Income-tax Act provisions on property transactions, rejects natural justice challenge.

Dr. Krishnaswamy S. Prasad, Mrs. Mythily S. Prasad Versus Union of India, The Appropriate Authority, The Income-Tax Officer, Mr. W.G.S. Saldanha, Mrs. Marie Saldanha, Mr. Peter Saldanha, Sri. Kumar Mothas, Director

Dr. Krishnaswamy S. Prasad, Mrs. Mythily S. Prasad Versus Union of India, The Appropriate Authority, The Income-Tax Officer, Mr. W.G.S. Saldanha, Mrs. ... Issues:Challenge to constitutional validity of Chapter XX-C of the Income-tax Act, 1961 and order passed under Section 269UD(1) of the Act.Analysis:1. The petitioners challenged the constitutional validity of Chapter XX-C of the Income-tax Act, 1961 and sought to quash the order dated 18.12.1997 passed under Section 269UD(1) of the Act. They also aimed to restrain further actions by the second and third Respondents and prevent the fourth, fifth, and sixth Respondents from handing over possession of the property in question.2. The petitioners entered into an Agreement of sale with the Vendor for a total consideration of Rs. 18,00,000, paying a partial amount upfront. They complied with the requirements under Chapter XX-C by filing Form No. 37-I with the Appropriate Authority but were not given any notice before an order was passed under Section 269UD(1) of the Act, leading to the current challenge.3. The main contention of the petitioners was the lack of reasons provided in the impugned order regarding the valuation of the property and the absence of an opportunity for them to present their case before the decision was made. This lack of reasoning and opportunity was considered a denial of natural justice.4. The Respondent No. 2 argued that the case fell within the parameters set by a previous Supreme Court decision, where completed transactions did not require additional notice or opportunity once possession was taken and compensation paid. The Respondent contended that the authority had already exercised its power, and the petitioners had received the compensation and possession of the property.5. The key legal question that arose was whether the impugned order could be quashed for not providing reasons and denying the petitioners the opportunity to present their case, thus violating principles of natural justice.6. The Supreme Court's decision in C.B. GAUTAM v. UNION OF INDIA AND OTHERS emphasized the importance of giving a reasonable opportunity to the concerned parties before passing an order with adverse consequences. However, the Court clarified that these principles did not apply to concluded transactions where possession had been taken and compensation paid.7. In the present case, the petitioners had paid the entire consideration, taken possession of the property, and the transaction was deemed concluded. The Court held that the principles of natural justice did not apply in such concluded transactions, and the petitioners' argument based on pending writ petitions was not valid.8. The Court referenced previous judgments to support its decision that when a transaction is concluded, possession is taken, and money exchanged without protest, the pending writ petition does not affect the finality of the transaction. Therefore, the Court dismissed the Writ Petitions, citing that the principles laid down by the Supreme Court for concluded transactions applied in this case.